Indonesia is facing a tough fiscal challenge as it grapples with the $7.27 billion debt tied to its Jakarta–Bandung high-speed rail project, known as Whoosh. According to CNBC Indonesia, about 75 percent of the project’s total investment was financed through loans from China, leaving operator PT Kereta Cepat Indonesia China (KCIC) under mounting pressure to meet both principal and interest payments.
President Prabowo Subianto recently hinted that the state budget (APBN) could be used to help manage the project’s debt. Speaking during a visit to Manggarai Station and the inauguration of the new Tanah Abang Station on November 4, he signaled the government’s willingness to step in. “Let’s not argue about this anymore. I’ve said it — the President of Indonesia will take responsibility. We are capable, we are strong, and the money is there,” Prabowo said, suggesting possible government intervention to ease KCIC’s financial strain.
However, economists have raised concerns that using public funds to cover the rail project’s debt would contradict the original business-to-business (B2B) model designed to keep taxpayers off the hook. Bhima Yudhistira, Executive Director of the Centre of Economic and Law Studies (CELIOS), warned that turning to the APBN would blur the line between commercial financing and public expenditure.
“If the APBN takes on this burden, it risks widening the fiscal deficit,” Bhima said. “Injecting capital into KAI to cover Whoosh’s debt would effectively make this a taxpayer-funded project, defeating the purpose of partnering with China.”
He emphasized that public money should instead support regional railway development in less-connected areas outside Java, rather than subsidizing a service mainly used by the upper middle class. Bhima also proposed that the state holding company Danantara — which holds roughly IDR80 trillion ($4.8 billion) in dividends — could play a bigger role through creative restructuring options such as debt swaps or partial cancellations.
Similarly, Muhammad Rizal Taufikurrahman, Head of Macroeconomics at INDEF, described the issue as a “fiscal dilemma.” He noted that while Whoosh is a B2B project, the involvement of state-owned enterprises still exposes the government to financial risks.
“If the government avoids using public funds, the project could default, undermining investor confidence. But if it uses the APBN, it creates a moral hazard,” Rizal said.
He recommended that restructuring the loan, lowering interest rates, and expanding revenue through Transit-Oriented Development (TOD) could stabilize the project without burdening Indonesia’s fiscal position.
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